Budget 2014: Double spend on innovation with a five year view

Updated: Jul 02, 2014, 12.56 PM IST

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Investments in infrastructure and removal of infrastructure bottlenecks will trigger the growth that we so desperately need.

By Sanjiv Kaul

Narendra Modi has been given a resounding mandate and the underlying proposition here is that each one of us who voted for him recognized the fact that the country was in trouble. The country required a surgical intervention and not a chemist to give out a Band-Aid. When you talk of surgical intervention you talk of expertise of a very high level and also decisiveness. Imagine a surgeon who is unsure where his next cut should be.

While they are annual in nature, budgets should be part of five year vision. Modi has been given the mandate not for one year but for atleast five years, if not more. If he has the confidence, the wherewithal and the intestinal fortitude to walk the talk, we would want him to have a five year vision. This year's budget and the ones to follow in subsequent years should be a subset of this five year vision.

Many of the actions maybe unpalatable but it is a leader's prerogative to ensure his decisions are correctly communicated and ensure they are executed. Undermining of the collective thought process that went into drafting of the action plan or budget should be done away with. For me rollbacks are a big no-no because this signals we are again going back to the days of managers coalition comprise. This budget should be a reflection of Modi's leadership vision.

First and foremost the budget needs to do is reign in the fiscal deficit. The Finance Minister has to figure out the percentage of fiscal deficit that can be trimmed. Whatever is the figure arrived, the government has to then catch this rampage bull by its horn and not let it go berserk. The current levels are high and it can be 50 to 100 basis points below that. One of the areas that I think that can be the major contributor in reducing fiscal deficit is by cutting subsidy. India's subsidy as a percentage of GDP is at a historic high and this has to be bought down. Reigning fiscal deficit will also have a direct bearing on the inflationary pressures in the economy.

The government, however, should not do in a way that states that to control inflation we have to compromise on growth. Growth has to be the focus because inflation is in many ways contributed by supply chain bottlenecks. We have not invested in infrastructure and if India has to grow, investments in roads, railways, warehousing, ports, power generation have to be shored up. Investments in infrastructure and removal of infrastructure bottlenecks will trigger the growth that we so desperately need.

The third point I would like government to address is to bring back the focus on manufacturing. Create real jobs rather than virtual jobs that do not create multiple levels of consumption.

Lastly I would want the government to look at other economies of the world and understand their percentage spend on innovation. Our percentage spend on innovation is miniscule compared to some nations. Can we have a five year view where we say we will double our spend on innovation from whatever levels we are at now?

Innovation is such that you cannot have a yearly assessment but it can be measured in five years. Innovate on value added services that improves the quality of the services and products, leading to sustainable higher realizations. Sectors like manufacturing, infrastructure, pharma-healthcare, IT Services, financial services, agriculture and education need innovation and clear measurable objectives. At the end of the day we need greater degree of accountability.